Before a packed session room during NACM's 2013 Credit Congress, six credit veterans testified as part of a Public Field Hearing being conducted by the American Bankruptcy Institute (ABI) on the needs of changes to the Bankruptcy Code in the areas of Section 503(b)(9) and preferences. What resulted was a lively discussion with seven members of the ABI Commission to Study the Reform of Chapter 11.
ABI's Geoffrey Berman noted that, with changes in the world financial environment, “a better set of tools is required” on Chapter 11 bankruptcy. Primarily, the Bankruptcy Code “was not designed to address these changes.”
An important topic that came up several times during the hearing was the topic of creditors' committees. While questions arose about costs involving committees, the ability to find people in the trades willing to serve well and, at times, conflicts of interest, the value of committees appeared to be reflected during ABI commission members' comments. ABI's William Brandt, Jr. said it was very unlikely creditors' committees “will see their sunset.”
“Our task is not to roll back the tides of history but reset the equilibrium,” Brandt said. Meanwhile, Commissioner Steven Hedberg noted the importance of the commission “balancing rights” between secured and unsecured creditors. “It's a big part of what's going to happen in this process.” However, such “balance” discussions also led to the theory as to whether or not service providers should have the same rights within 503(b)(9) as manufacturers.
On preferences, Berman took exception to testimony regarding the idea that all or majority of trustees are shot-gunning without analysis or care while filing preference claims. “Not everyone takes a check register and files a lawsuit,” he said. “Saying a trustee is just taking a check register and filing lawsuits is not typically accurate. Yes, there are firms that too that, but that's not how everybody does it.”
Berman also got into a spirited debate with Past-National Chairman Kathy Tomlin, CCE, of Central Concrete Supply Co., Inc., over the proposal that the onus should be on those filing the preference claim rather than the creditor. He also intimated that the “guilty until proven innocent” theory could be working against creditors.
Berman argued that modern credit managers have a greater opportunity/ability to gather information than ever before—“The moment you have a claim, [you can] go pull the records.” Tomlin responded that creditors only had their own record and that advances in technology have worked to provide debtors with that same greater opportunity/availability of info.
-Brian Shappell, CBA, CICP, NACM staff writer